Introduction
Enterprise Resource Planning, which is usually abbreviated as ERP refers to the process through which a business enterprise controls as well as integrates the essential segments of its daily operations. The ERP system is concerned with the management of information by integrating the functions of various business enterprise departments; for instance, the planning, finance, inventory, human resources, sales, purchasing along with the marketing departments.
In most of the scenarios, ERP is made use of in the software context. Due to the much publicity of the ERP methodology, enormous software applications are being formulated to assist companies in the implementation of ERP within their operations. In different words, ERP can be literally defined, as the glue, which binds an organization,’s various computer systems together.
Initially, every individual department used to have a specific system, which was particularly designed to suit the tasks of that single department (Leon 44). However, with the introduction of the ERP, even though every department within a business enterprise still operates its individual system, it is capable of sharing as well as communicating information to the other company’s departments in an easy manner.
The ERP system puts together an organization’s internal as well as external information, which is used in the management of its operation. The accountings, sales along with the management of customer relations are integrated together within the whole organization. By the use of diverse software, the activities of the organization are automated through the ERP system.
The principal aim of the ERP system is to allow information flow within the company’s boundaries in every business function. It also establishes connections with the external stakeholders. ERP systems operate by the use of various hardware as well as network configurations, characteristically utilizing a specific database as the information storage area. Every enterprise provides the distinctive ERP with the accounts, job costing, and order processing, manufacturing, as well as stock modules (Shtub and Karni 112).
Through the provision of CRM modules, that is, Customer Relationship Management modules; which consist of emails, bulletin board, document management, schedulers along with graphical calendars, the ERP system is in a position of delivering distinctive interaction level within the organization’s departments.
The ERP system utilizes vibrant technologies to ensure that the presence of software enables data sharing within an organization while also reducing the dependency on expensive interfaces within applications. At the long run, the implementation of ERP system within the company is considered to cut down both ownership and operation costs.
On top of CRM, ERP also provides WAN (Wide Area Network) access, logistics on stock, sales, and purchases along with other diverse solutions. The ERP also supports Oracle databases, corporate portal along with cloud services.
ERP Domain Usage
The ERP system makes use of different domains to undertake its functions. One of the commonly use domains is the SAP. SAP is the acronym of Systems, Applications along with Products within the data processing activities (Head 53). SAP is an internationally renowned ERP domain, which is located within Germany.
SAP actually operates a significant percentage (approximately 30 percent) of the World’s ERP market share. SAP was originally designed to offer several ERP solutions to business organizations. Nevertheless, it has been realized that the SAP domain utilization has several advantages along with disadvantages. One of the major advantages of the SAP domain is that it is made up of comprehensive features. Besides, these comprehensive features are also considered user friendly.
The other main advantage of the SAP domain is that it is recognized as the universal standard. Due to the reality, that SAP domain is amongst the chief ERP domain provider globally; its products are commonly used in the definition of the expected market standards within the domain segment.
Scalability is also recognized as one of the advantages of utilizing the SAP domain. Its scalability allows readjustments to be made so as to suite the software user’s size along with scope. It is also advantageous to make use of SAP because it allows the customization of the ERP within an organization at greater magnitudes.
On the other hand, the most predominant disadvantage of the SAP is its cost (Harwood 83). SAP is considered a quite expensive software package especially for the small enterprises. Moreover, the final users of the ERP have to undergo a special training about the application of the SAP software in order to gain effective productivity within the organization.
The United States’ international IT organization commonly known as oracle also deals with various ERP software. One of the ERP software produced by Oracle company is the ORMS which is an Oracle Merchandising System specially meant for the enterprises concerned with the provision of retailing services. Nevertheless, the ORMS is also considered to have its advantages along with disadvantages.
The main advantage of using ORMS is that it possesses networking features of superior quality. In addition, these networking features are applicable in real-time scenarios. The other major advantage of the ORMS is that it is less costly when compared to other ERP domain software such as SAP.
On the other side, the predominant disadvantage of the ORMS is that it is very incompatible with the identical products within the current software market (Shtub and Karni 28). ORMS is also disadvantageous due to the fact its resource requirement is considered quite high. Actually, the product is highly demanding, as it requires a wide range of hard during its initial implementation.
The United Kingdom’s Sage Group also offers software solution within the ERP domain. The firm has produced the Sage Pro ERP, which is specifically designed for the enterprises involved with retailing businesses. The Sage Pro ERP just like the other software domains mentioned earlier on within this report has both advantages along with disadvantages.
The main advantage is that it is simple and new users experience no problems once they try utilizing it. This domain is user friendly particularly because it utilizes the Graphical User Interface, which is commonly abbreviated as GUI. The other advantage of the Sage Pro ERP is that it requires fewer resources as the number of hardware necessary for its smooth implementation is minimal.
However, it is highly disadvantageous to make use of this domain because it is associated with integration issues. The product does not integrate well with the other types of systems. Moreover, Scalability issues come up which greatly interferes with the system performance in the event that the domain is upwardly scaled (Leon 71).
The other firm, which provides ERP solutions to various organizations, is the Microsoft Dynamics. This firm offers the Microsoft Dynamics NAV ERP software, which greatly assists organizations in effectively, as well as efficiently managing their operations. The main advantage of this specific software package is that it has an attractive interface, which is friendly to the users.
In addition, it happens to be the easiest software to use when compared to the other identical products. However, the domain is unfortunately associated with specific scalability issues and it is not that secure especially when implemented within large organizations.
Real Case ERP application
In the previous years, within majority of the business organizations, every department made use of its individual computer files while undertaking its daily operations. For instance, the pending invoices could be traced within the finance department while the pending orders were the reserve of the department concerned with making purchases.
In that scenario, purchasing managers had to make calls to the finance department to make inquiries regarding the already paid invoices. However, with the emergence of the ERP software, things have changed. Employees are able to access information from different departments without making use of calls (Head 97). Therefore, purchasing managers can easily identify the already paid invoices without contacting the finance department.
It is thus evident that the ERP enables the management to save time. It also assists in the establishment of better relationship with various stakeholders because they are able to make quick responses to any questions raised by them without making unnecessary consultations. ERP assists in the streamlining of all company transactions, that is, from the placing of orders to the settling of bills. The companies gain incredible efficiencies using ERP.
Even though the ERP system is especially designed with the best practices perspective, its operation takes place within the real-world agency. Best practices comprise of the ideals, which assist an enterprise to aspire while the real-world practices are concerned with initiating transformations, which are useful in suiting the distinctive business requirements. Therefore, a misfit occurs in the event that there is no perfect alignment of the real-world practices to the present best practices (Harwood 72).
In situations within which misfits are found to have occurred, the ERP system is unable to satisfy the users’ needs. This in turn brings about dissatisfaction to the users along with low productivity, lack of realizing the anticipated benefits, workarounds and, finally, the misperception that the ERP system is a total failure.
The ERP software covers a wide range of business processes. The financial management, operations management along with the human resources functions is actively supported by the ERP system. ERP vendors have also upgraded the system such that core functions, for instance, the Advanced Planning along with Scheduling (APS) are well augmented within the organization. Most of the ERP software assists the management in ensuring data accuracy as well as integrity.
For instance, thorough the utilization of ERP software accountants is able to comply with the general rules established by the GAAP. GAAP is the acronym, which stands for Generally Acceptable Accounting Practices (Leon 35). The GAAP standards are essential in establishing whether the company’s financial statements make a true reflection of the enterprise’s financial condition. In the course of implementing ERP system, companies can refer to previous implementations.
Initially, the ERP systems were mainly concerned with the IT functionality while overlooking the enterprise process development. Consequently, the anticipated benefits were delayed or compromised.
Before the required ERP system is implemented, considerations are made to establish the system conformity to the enterprise’s processes. In addition, it is determined well in advance, whether the software requires radical modification prior to implementation. However, it is usually the business processes, which are modified to conform to the proposed ERP software instead of the software.
This is because software modifications are usually costly and are associated with risking data integrity. In case the data integrity is put at risk, the ERP’s principal purpose is jeopardized (Leon 43). Besides, software modifications are associated with highly costly as well as intricate software upgrading activities.
Before implementing an ERP system within an organization, it is vital making consultations with IT consultants who hold sufficient information regarding the various ERP software offered by different software dealers. The IT consultants are the ones who are in the best position of identifying the appropriate ERP program, which appropriately suits a specific business enterprise.
The ERP system’s software component should be handled with lots of care because it is the backbone of an organization’s information. It is actually liken to the humans’ arterial system and this its failure will definitely result to the collapsing of the company.
The ERP system Benefits
The system has been discovered to bring about several benefits to the enterprises, which make good use of it. In the first place, the financial information of a given organization remains both centralized as well as accessible to every person willing to make use of it.
Besides, ERP assists the company management in getting the general overview of the organization’s progress within a single glance and thereby making use of the obtained information to make timely decisions. ERP is also beneficial because it brings down the number of the physical inventories kept with the organization. In addition, due to the integration of various departments’ records the inventory details are considered considerably accurate and reliable.
The ERP technology also comes in handy in the recording of the clients’ orders, making of deliveries and the provision of customer care services (Shtub and Karni 106). Due to the automation of operations through the ERP system, productivity is increased because employees do not move from one department to the other in search of certain information. Moreover, the risk of losing crucial information is significantly brought down through the application of ERP technology.
The ERP has also been discovered to be quite beneficial to the company because it assists in improving the manner in which business operations are carried out. Through the implementation of ERP, firms are able to discover novels ways through which business operations can be carried out smoothly and at lesser costs.
Even though the initial implementation of the ERP is assumed considerably expensive, once it is properly put in place it pays off immediately (Harwood 57). The integration of the myriad business operations through ERP fundamentally saves time as well as cuts down expenses.
Moreover, decisions are made within a shorter time span and at a greater accuracy (Leon 56). Data within the firm is visible to all the relevant parties thereby allowing sales forecasting which is quite vital in the optimization of inventories. The visibility of data also allows easier order tracking, tracking of revenues as well as the matching of the purchased orders, inventory receipts along with the costing.
The centralization of business data through the ERP system is also linked to various benefits. First, synchronization of transformations within compound systems is eliminated. In addition, a standardized product coding is easily established. ERP is also beneficial because it enables the management to access information at any time and thus ideal decisions can be made without any delays. Lastly, ERP secures sensitive data because several security systems are consolidated to single structures.
Risks associated with the ERP system
In spite of the numerous benefits associated with the ERP, it also has certain risks linked to it. Due to the limited scope of the system, it is not possible to make use of wide approaches while accessing the business environment. However, it is essential to make use of wide approaches within the current business scenario while solving problems to remain competitive within the market segment. In addition, the ERP is associated with high costs of maintenance.
The information systems require the input of IT experts in order to function effectively and this comes at greater costs. In the process of meeting the ERP escalated maintenance costs, the business enterprises run the risk of incurring heavy losses. Moreover, there is the risk of experiencing problems in the customization of the ERP programs (Head 102).
In addition, the attention of the management can end up being diverted in the process of overcoming opposition to the circulation of sensitive information within certain departments. It has also being revealed that the competitiveness of a specific business enterprise is greatly interfered with negatively in the process of modifying the business process as to make them compatible to ERP.
Because of the scalability problems associated with the ERP domains, the organizations may face difficulties in expanding its operations base. It is also unfortunate that unnecessary dependencies emerge due to the integration of very independent businesses.
Conclusion
The relevant parties have recognized the risks associated with the ERP systems and are working towards the formulation of new ERP trends. Efforts are being made to develop an ERP which is more flexible, which can be applied within the e-business as well as which is Web-Enabled. In other words, the ERP being developed has the potential addressing the various fallbacks within the present ERP.
Through the use ERP programs, business operations can be streamlined and thus achieve better productivity. The sharing of data through intranets as well as extranets is made possible by the ERP (Harwood 46). ERP also makes use of servers to facilitate communication within the various departments of a certain firm and thus enabling faster delivery of services to the clients.
Even though ERP is widely considered a complex undertaking, it plays a significant role in the application of technology in diverse workplaces. It is widely understood that any sort of technology makes work easier. It is vital to note that successful implementation of ERP requires the appropriate software, personnel along with hardware. It should also be noted that the complexity of ERP systems could only be resolved by a highly technical management.
ERP should be viewed, as an enterprise, which is digital and thus different professionals, should work hand in hand in order to facilitate its smooth implementation. However, in spite of the previously mentioned risks, all business organizations should reconsider making use of ERP.
Works Cited
Harwood, Stephen. ERP: The Implementation Cycle. Oxford: Butterworth-Heinemann, 2003. Print.
Head, Simon. The New Ruthless Economy. Work and Power in the Digital Age. Oxford: Oxford UP, 2005. Print.
Leon, Alexis. Enterprise Resource Planning. New Delhi: Tata McGraw-Hill, 2008. Print.
Shtub, Avraham, and Karni, Reuven ERP: The Dynamics of Supply Chain and Process Management. New York: Springer, 2010. Print.